Skipping Student Loan Payments During the Shutdown Could Delay Your Home Purchase

The government shutdown has left uncertainty among people who are applying for student loans or who have student loans and are hoping to have a break from paying the monthly bill.

Not so fast. Student loan payments still need to be made, or you can take a hit on your credit score, which will have consequences down the line—especially if you're looking to buy a home.

"While the government is shut down, it doesn't change the fact that your student loans are due," Jay Zigmont, certified financial planner and founder of Childfree Trust, tells Realtor.com®.

More than 9.9 million students receive student aid, in the form of grants and loans, at approximately 5,400 schools through these programs, according to the U.S. Department of Education. The shutdown has affected nearly 1,500 employees within the agency.

Despite the pause in operations, loan payments are still due. The Federal Student Aid office states on its site: "Borrowers should still make payments on federal student loans. Processing of refunds and discharges could be delayed."

The reason timely payments are still important is that once a federal student loan is secured, borrowers are dealing with a loan servicer. The loan servicer is a company that the federal government assigns to handle the billing and other aspects of the loan.

Credit score slump

Any lapse in payment will have consequences. One missed payment, which will affect a credit score, can take years to correct.

"A credit card payment tends to drop a score more quickly because it is unsecured debt and perceived as a larger indicator of payment discipline," Eric Croak, certified financial planner at Croak Capital, tells Realtor.com.

The slight positive is that a missed student loan payment may not set a person back too much.

"A student loan will ding your score, but it’s generally weighted a bit less, especially a federal loan," says Croak.

Regardless of weight, Croak explains, any account reported late (even once) will remain on your credit report for seven years.

"Doesn’t matter if you were 30 days late or 60 days. Doesn’t matter if the amount was $50 or $5,000. Every day, every dollar, is on record."

"Each month that goes by without a late payment will improve your credit score, but it may be a year or more before you see a measurable change," Zigmont adds.

But if you're looking to become a homeowner in the near future, tardy payments are something to keep in mind.

"Mortgage lenders will typically expect to see 12 months of clean payment history before approving a conventional loan with the best rates or terms," explains Croak. "So if you’re eyeing homeownership as something you’ll get to next year, don’t let student loan delinquency become a factor in your plans."

Trump's 'forgiveness' plan

Despite the government shutdown, the U.S. Department of Education is sending some student loan borrowers emails that their debt will soon be forgiven.

CNBC reports that the department email reads, in part, "You are now eligible to have some or all of your federal student loan(s) discharged because you have reached the necessary number of payments under your Income-Based Repayment (IBR) Plan."

Borrowers who are part of the Income-Driven Repayment (IDR) plan and who have made enough payments toward their student loans are eligible for forgiveness.

An IDR plan bases your monthly student loan payment amount on your income and family size. For some people, payments on an IDR plan can be as low as $0 per month.

There are about 2 million people under the plan, but not everyone qualifies. According to the Washington Post, borrowers who have been in repayment for at least 25 years are eligible for debt cancellation under the IDR plan. Those borrowers are receiving notices that they qualify for the relief.

The email states that borrowers have until Oct. 21 to opt out.

"After that date, the discharges will be processed for most eligible borrowers within two weeks, but it could take longer for some borrowers," the notification states, according to the Post.